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Posted on 1/7/20 at 1:57 pm to Willie Stroker
I've read Kahneman and think his work is interesting but when Ramsey says to pay off your credit card debt, starting with the smallest balance first, as opposed to paying of the credit card with the highest interest rate, then I consider that to be horrible advice. It's causing someone to pay more in interest when they are already in debt.
Like I said, freshman algebra ain't complicated
Like I said, freshman algebra ain't complicated
Posted on 1/7/20 at 1:58 pm to Double Oh
quote:
Double Oh
Posted on 1/7/20 at 2:07 pm to iAmBatman
quote:
I've read Kahneman and think his work is interesting but when Ramsey says to pay off your credit card debt, starting with the smallest balance first, as opposed to paying of the credit card with the highest interest rate, then I consider that to be horrible advice. It's causing someone to pay more in interest when they are already in debt.
Like I said, freshman algebra ain't complicated
I don't disagree with you on the math part, but I do on the psychological part. He says that so that people can feel a sense of accomplishment and his whole debt snowball is based off of it.
Posted on 1/7/20 at 2:11 pm to RedHawk
NO ONE GETS OUT ALIVE.
Spend the money, take the trips, do things you enjoy, even if you occur some debt because one day you won't be here.
Spend the money, take the trips, do things you enjoy, even if you occur some debt because one day you won't be here.
Posted on 1/7/20 at 2:51 pm to basiletiger
Posted on 1/7/20 at 5:43 pm to Willie Stroker
quote:
Plenty of intelligent people who passed freshman algebra still make very impulsive and irrational decisions.
I was a banker for a while, I can say from that experience that there is no correlation between a person's income level/education, and their ability to manage money. We had clients who were doctors, dentists, engineers, lawyers, and even accountants with major debt issues. They all understood math perfectly fine, but could not control their spending.
Posted on 1/8/20 at 11:39 am to RidiculousHype
Ramsey's advice is for people who are bad with money, have poor self-discipline, etc. And that's lot of people and I'm sure he's really helped them.
But if you're good with not overspending, saving money, etc., following his advice costs you money.
But if you're good with not overspending, saving money, etc., following his advice costs you money.
Posted on 1/8/20 at 1:06 pm to iAmBatman
I envy those that can troll this thread 
I gave a copy of Dave Ramsey’s book to someone, but I’d bet it went straight in the trash. I’m confident the program would work... the only downside is it’s no good unless you have someone willing to improve their situation.
I’m talking about someone with wages garnished but will take out a payday loan to buy an Apple Watch. Some people have real problems.
You think anyone in that situation is worried about balances and interest rates? Debt becomes part of life and when you play debit card roulette rather than face the reality of an account balance, you are beyond any traditional advice.
I gave a copy of Dave Ramsey’s book to someone, but I’d bet it went straight in the trash. I’m confident the program would work... the only downside is it’s no good unless you have someone willing to improve their situation.
I’m talking about someone with wages garnished but will take out a payday loan to buy an Apple Watch. Some people have real problems.
You think anyone in that situation is worried about balances and interest rates? Debt becomes part of life and when you play debit card roulette rather than face the reality of an account balance, you are beyond any traditional advice.
Posted on 1/8/20 at 1:13 pm to Overbrook
quote:
Ramsey's advice is for people who are bad with money, have poor self-discipline, etc. And that's lot of people and I'm sure he's really helped them.
But if you're good with not overspending, saving money, etc., following his advice costs you money.
His advice is also good for people on really tight budgets/low incomes. Freeing up disposable income is huge. Not everyone can afford to go after high interest rates first. They need to free up budget ASAP to help with the unexpected costs that continually cause them to have debt issues.
The "math" supports dave ramsey's method. The inputs/variables are not the same for everyone. The end goal for everyone isn't paying the least amount of interest. For some the end goal is just surviving.
Posted on 1/8/20 at 1:27 pm to basiletiger
quote:
NO ONE GETS OUT ALIVE.
Spend the money, take the trips, do things you enjoy, even if you occur some debt because one
Amen to this. Unfortunately, you’re going to find a lot of people that don’t appreciate or agree with this. Much easy to understand when you’ve lost a loved one, especially unexpectedly.
Posted on 1/8/20 at 1:40 pm to Paul Allen
quote:
men to this. Unfortunately, you’re going to find a lot of people that don’t appreciate or agree with this. Much easy to understand when you’ve lost a loved one, especially unexpectedly.
I'm with ya, 100%. Yes, save some money, have an emergency fund so you're not scrambling to cover life's unpredictable events, make sure you have some retirement savings....but dying with a big pile of money is no way to live, if you've been cheap rather than thrifty along the way.
Posted on 1/8/20 at 1:52 pm to Engineer
quote:
I envy those that can troll this thread
Not trolling anything boss...his advice is genuinely bad advice considering it keeps people in debt longer than necessary. You can get out of debt faster by applying the same cash outlays (ie payments) to the debt with a higher interest rate first...not by doing some silly debt snowball nonsense.
Someone show me the math that states paying low interest balances before you pay off higher interest balances creates a situation where the debt is paid off faster (all payment amounts being the same) and I'll admit I was wrong and retract everything I've said.
Posted on 1/8/20 at 2:01 pm to iAmBatman
quote:
Not trolling anything boss...his advice is genuinely bad advice considering it keeps people in debt longer than necessary. You can get out of debt faster by applying the same cash outlays (ie payments) to the debt with a higher interest rate first...not by doing some silly debt snowball nonsense.
Someone show me the math that states paying low interest balances before you pay off higher interest balances creates a situation where the debt is paid off faster (all payment amounts being the same) and I'll admit I was wrong and retract everything I've said.
I don't think anyone would disagree with you from a math standpoint, we are talking about a psychological standpoint. Sometimes people need to crawl (baby steps) before they can walk or run.
Paying off the lowest balance first makes sense for a lot of people to feel a sense of accomplishment and then from there they feel they can tackle the rest.
Barely putting a dent in the highest interest rate highest balance card might stagnant their progress as they see no end in sight so what's the use.
This post was edited on 1/8/20 at 2:04 pm
Posted on 1/8/20 at 2:39 pm to iAmBatman
quote:
When different can be mathematically proven to be misguided, then it does mean wrong
Hang on. If these people were good at math, they wouldn't be in the situations they are in.
Posted on 1/8/20 at 2:41 pm to RedHawk
quote:
Paying off the lowest balance first makes sense for a lot of people to feel a sense of accomplishment and then from there they feel they can tackle the rest.
I don’t have a dog in this yard, but that’s exactly it. Other than medical debt, or something which isn’t totally discretionary, most people find themselves in debt not because their math skills are poor, but because they allowed their emotions to get the better of them and became impulsive. So the chosen method isn’t as important as just doing something ***and making it stick.***
IMO, neither approach is “bad advice”, as both have been proven to work. But a more emotional person is likely to fail if they choose the purely analytical method. That person likely needs to see some small wins to keep doing what must be done.
Per Clark Howard:
quote:
Your unique personality and motivations will probably determine whether the Avalanche or Snowball method works best for you when it comes to paying off debt.
If you’re more analytical and mathematical, you will probably be drawn to the Avalanche method, which is focused on what makes the most sense from a numbers perspective.
If you’re more emotional, you might appreciate that the Snowball method lets you celebrate victories earlier and more often.
Whichever method you choose, the sooner you get started, the sooner you’ll have that pesky debt out of your life.
Posted on 1/8/20 at 3:11 pm to LSUFanHouston
quote:
Hang on. If these people were good at math, they wouldn't be in the situations they are in.
Which is why I said if you can pass freshman algebra, you don’t need Dave Ramsey to fix your life.
Posted on 1/8/20 at 3:12 pm to RedHawk
quote:
to feel a sense of accomplishment
If you want a sense of accomplishment, go to the gym. If you want to get out of debt, pay off the debt that is charging you the highest interest.
Posted on 1/8/20 at 3:29 pm to iAmBatman
quote:
Which is why I said if you can pass freshman algebra, you don’t need Dave Ramsey to fix your life.
When you are developing a budget, or negotiating a pay raise, or balancing a checkbook, or figuring out the best credit card to use... when are you using the topics you learned in freshman algebra?
These people don't get in trouble because they can't figure out how to add 2 and 2. They get in trouble because when they charge 2 today, they don't have a plan to have 2 next month to pay off the 2 they charged.
If the simple math part of their brain was running things, then they wouldn't be in this place to begin with.
These people don't need math answers... they need psychological answers. Paying off the smallest debt first gives a psychological boost to people who need such a boost. If you can pay off the "small" debt in 2 months, or the higher-interest debt will take 14 months to pay off... the person who needs that psychological boost will GIVE UP before they make the 14th month.
These people are in a terrible financial situation, and after his program, are in a better financial situation. Perhaps they aren't in as good a financial situation they would be in if they had the fortitude to pay off high interest card first, and delay the "victory" of a paid off card. But the psychology tells us they won't ever get there... they will quit first.
For someone who has never had financial issues or seen someone who has had them... I understand this can be a difficult thing to comprehend. But the thing to remember is, it's not about financial maximization, it's about psychology.
Posted on 1/8/20 at 3:35 pm to LSUFanHouston
quote:Not that I disagree with you at all, but it gets back to someone previous’s point: MATHEMATICALLY Dave is wrong. Realistically, with a human element and other factors, he is right for tons of people who do t care or know about the math. But to say “well there’s two sets of MATH and it depends”, no there isn’t.
But the thing to remember is, it's not about financial maximization, it's about psychology.
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